Post
Topic
Board Economics
Re: IS THIS HOW USD IS CREATED?
by
deisik
on 28/07/2019, 07:56:04 UTC
Maybe, solid as in reputation?
Sure, but not solid as in there are any tangible assets transferred to the bank in order to obtain the loan or credit

Reputation is everything these days

According to Robert Greene, reputation is "a treasure to be carefully collected and hoarded", which you should guard with your life. In fact, it has always been so, e.g. outlawing someone was considered a pretty severe punishment in the past. I feel certain that many people who defaulted on their loans would prefer to keep their reputation intact (represented by their credit history in today's world) and rather have bank taken their property

The bottom line is that it remains to be seen what is more solid here. And personally, I'm strongly inclined to think that reputation would win. That's basically why banks don't need to have the rights on any tangible assets transferred to them as losing reputation through a default will have more devastating consequences. It can be said that bank loans in the form of a credit card are already collateralized by the borrower's reputation

Here is an article written by the Bank of England (one of the most important banks in the world, and which most other central banks are based on)

You'd be surprised but I cited this article as early as 2016. But that doesn't deny or defy the facts that a) banks have deposits, b) loans are typically collateralized, and c) those which are not may come straight from these deposits

Either way, in fact, any of these three ways, banks don't create money completely out of thin air